By Tiernan Ray

Wedge Partners’s Jun Zhang today reiterates a view that Apple’s (AAPL) deal with China Mobile (CHL), announced a week ago, will boost the company’s sales in China, in line with Zhang’s thoughts on the matter previously.

While there are some puts and takes, with some China Mobile sales perhaps robbing sales from competitors China Telecom (CHA), and China Unicom (CHU), the net results may be a rise in total sales of the iPhone in China from a current rate of 2.7 million to 2.8 million per month, to a range of perhaps 2.8 million to 2.9 million per month:

We have tracked several major sales platforms including Suning, JD, Tmall, as well as some of Apple’s regional distributors, and have talked to several China-based operators and we believe that current China Mobile iPhone 5s (with contract) pre-orders in the first two days were roughly 100K units (slightly lower than China Unicom’s 120K pre- orders and China Telecom’s 150K pre-orders earlier in the year). We also believe that unlocked iPhone 5s pre- orders (for China Mobile) in the first two days from open channels including Suning, Gome, Apple’s own authorized stores, JD, Tmall, etc. reached about 150K, compared with 400-500K pre-orders for China Unicom and China Telecom when the iPhone 5s initially launched in China in September. While the initial indications of iPhone 5 demand at China Mobile appear to be lower than the other carrier launches, it is not exactly comparable given the delayed launch at China Mobile (early 2014) from the global launch of the iPhone 5s back in September. However, it is clear that China Mobile’s pre-order activities have affected other channels’ iPhone 5s/5c sales, as we anticipated. Specifically, we believe iPhone 5s/5c sales dropped about 35% since China Mobile announced its iPhone deal from the week that pre-orders started.We estimate current China iPhone sales are on a 2.7 – 2.8 million per month run-rate, including open market sales. The weekly sales were around 70K units before China Mobile launched the iPhone, but dropped to roughly 45K units per week (excluding China Mobile sales) after China Mobile began accepting pre-orders. We believe that when China Mobile launches the iPhone with a clear subsidy package, non-China Mobile iPhone sales from the open market and other competitors will drop to 35K units per week and 1.4 million units per month.We expect China Mobile’s iPhone 5s/5c and TD-LTE versions of unlocked iPhone 5s/5c monthly sales could reach 1.4 – 1.5 million units per month. We believe total iPhone 5s/5c + iPhone 5 sales will reach 2.8 – 2.9 million units per month in Q1, up from a current 2.7 – 2.8 million units per month.

Some readers have pointed out in the comments section that today’s report seems contradictory given that Zhang had argued on December 18th, when no deal with China Mobile materialized, that the lack of a deal was no surprise. With a deal having materialized subsequently, one wonders, shouldn’t Zhang’s thinking have changed?

I reached out to Zhang’s office to point this out and was given the reply that in fact Zhang had allowed for a possible deal, just had not expected any “promotion” of a deal:

Nothing has changed, we said China Mobile will deliver iPhone in Q1, but wont be aggressively promoting the iPhone until 2nd half of 2014. The situation is still the same and the logic is still the same, as China Mobile will manage their subsidy pool and their 4G network wont be ready until 2nd half of 2014.

Zhang’s table of historic and projected future Chinese iPhone sales remains the same in this note as it was in the note from the 18th:

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There are 43 comments

DECEMBER 30, 2013 2:24 P.M.

Ron wrote:

Doesn't matter. Tim Cook F'ed the entire China Mobile announcement up anyways. It could of done wonders for the stock, but with the Waking Disaster Tim Cook at the helm, all bets are off. Nobody cares about China Mobile. It is a thing of the past just like Apple. Apple is led by Cook the Boyscout who wouldn't know Good news from an IPod. Cook and the Invisible PR team at Apple are all on a short leash. They are a F Pathetic Bunch of Clowns. Stock is back to where it was before China Mobile. Great job Tim! Way to go. Can't wait to launch in Siberia next! Now your telling the Shsreholders to vote against Carl Ichsn. Are youbF kidding me? You hsve done nothing with your excess cash except pay useless dividends. You have had 2 years to show you understand how to increase shareholder wealth and you have done Squat! Might as burn the money since you haven't a clue how to put it to use. Carl Ichan's plan on buybacks is right on target. What's the problem, afraid Carl will upset your little game at Apple of You get rich, Shsreholders get Porked? Step aside Tim and Resign. You have been a complete Failure. It's time Carl takes charge. By the way, take your accountant Oppenheimer with you. 550 is a Disgrace.

DECEMBER 30, 2013 2:26 P.M.

Sal wrote:

Tim Cook on the right thing and resign.

DECEMBER 30, 2013 2:27 P.M.

Anonymous wrote:

ON

DECEMBER 30, 2013 2:29 P.M.

LonnieL wrote:

What is the purpose of reiterating this one idiot's opinion?

DECEMBER 30, 2013 2:31 P.M.

Will wrote:

Who the F is Zhang? This joker just said 2 weeks ago that the deal wouldn't happen until June 14. Now he is raising his monthly shipments. Where can I get a job at Wedge?

DECEMBER 30, 2013 2:36 P.M.

Ed wrote:

Google buys Apple soon.

DECEMBER 30, 2013 2:38 P.M.

John Crouch wrote:

Obviously the reference in line three of the second paragraph to " per share " should have been to " per month "

Thank you,

John Crouch

DECEMBER 30, 2013 2:39 P.M.

Ron wrote:

Marissa Mayer next Apple CEO

DECEMBER 30, 2013 3:19 P.M.

Tiernan Ray wrote:

John Crouch: You are correct. Thank you very much for pointing out the error.

DECEMBER 30, 2013 3:21 P.M.

Anonymous wrote:

Apple's stock is completely broken. The rest of the profitable tech stocks are celebrating record highs along with the general market. Despite relatively generous buybacks and dividends, Apple's stock remains in the toilet while, Google, Amazon, and Priceline are on steroids and offering nothing. Google has easily doubled Apple's share price and yet when you look at Google's fundamentals they are clearly not 2X better than Apple's if that has any bearing on a stock's intrinsic value. There has to be something wrong with how the company is being run if the fundamentals are good and they're sitting on a mountain of cash with low debt. Instead, investors are being driven to buy FaceBook and Twitter stock in record volumes and they barely make any profit at all. I can only surmise that Tim Cook has jinxed Apple and has scared investors off to any other stock. There are no investors who have any confidence in Tim Cook. Apple's CEO made a bet on himself that he could increase shareholder value and he screwed himself by being unable to do a damn thing.

Apple being worth $550 a share is rather ridiculous because they're clearly making more money than they did last year so why should the stock be worse off. Why? Because Wall Street hates Tim Cook. They see him as an incompetent CEO in charge of a company with huge amounts of wealth. Apple won't go into mobile payment services or cloud services that can bring the company far more revenue than trying to stubbornly go up against cheap Android devices which are already outnumbering every man, woman and child on the planet. Tim Cook doesn't seem to realize this. Apple should either build or acquire a search engine and go head to head with Google and show them how it feels to be squeezed by free competition. Apple shareholders are going to be crushed again as Apple misses expectations on all of its products. Another disaster in the making for shareholders two years in a row.

DECEMBER 30, 2013 3:31 P.M.

Dan wrote:

If you keep quoting this guy my subscription is over. There is no price yet. How would people buy without a price? They need to see what it will cost them first. So silly!

DECEMBER 30, 2013 3:45 P.M.

Anonymous wrote:

While there are some puts and takes, with some China Mobile sales perhaps robbing sales from competitors China Telecom (CHA), and China Unicom (CHU), the net results may be a rise in total sales of the iPhone in China from a current rate of 2.7 million to 2.8 million per month, to a range of perhaps 2.8 million to 2.9 million per month

On what base did Zhang bring up this number？

DECEMBER 30, 2013 3:57 P.M.

Anonymous wrote:

China mobile didn't give out the price of iphone yet. What Zhang said makes nonsense.

DECEMBER 30, 2013 4:06 P.M.

Dan wrote:

How do I cancel my subscription?

DECEMBER 30, 2013 4:16 P.M.

Dan wrote:

So Zhang thinks China Mobile will only add around 2 million more phones? If Apple is lucky? Wow what a joke.

DECEMBER 30, 2013 4:18 P.M.

Dan wrote:

I pray that Apple cans Cook. The shareholders are fed up with this monkey and he is really a disaster. He is a game player and he has no respect for the owners of the company.

DECEMBER 30, 2013 4:48 P.M.

p2i wrote:

I don't know why one dumb ace's opinion should matter. But Wedge Partners was only founded in 2002 in Denver and has very few employees, 11 to 50 as listed. It could be closer to the 11. Hardly a large, old firm with a solid reputation. However, they are cited in a number of " financial news" articles. Jun Zhang has only worked for 3 firms since his college education. Senior Consultant / Project Manager at MFC Insight less than 2 years, Research and Publication Director at United States Information Technology Office (USITO) less than 2 years, and Senior research analyst at Wedge Partners for 6 years.

DECEMBER 30, 2013 4:50 P.M.

Jack Daniels wrote:

Not sure where Wedge is getting its news. According to BNN (Canada), China Mobile preorders for iPhones have exceeded 2M

He said they could go from 2.8 to about 2.8. So China Mobile could produce not 1 extra iPhone sale. That is really logical. Mr. Ray, you have got to be kidding by constantly quoting this guy? Is it because he sounds Asian and supposedly he would have better contacts or be brighter than other analysts? I don't get it.

If he is wrong, we will never let him forget it.

DECEMBER 30, 2013 5:22 P.M.

Tiernan Ray wrote:

Chiam: Actually, no, that's not what this article says. As written in paragraph 2, Zhang believes that the China Mobile partnership will boost iPhone sales from a prior range of 2.7 million to 2.8 million units per month to a new range of 2.8 million to 2.9 million per month. The difference between the mid-points of those ranges, 2.85 million now versus 2.75 million previously, is 100,000 units per month, or 1.2 million units in total over 12 months.

DECEMBER 30, 2013 5:22 P.M.

Dan wrote:

I think we all need to let our subscriptions to Barrons expire and look elsewhere!

DECEMBER 30, 2013 5:28 P.M.

Jack wrote:

Time for Tim Cook to step down. The stock will now give back alot of its price as China Mobile has really no benefit according to Zhang. I figure we head back down to 440. With a selloff in the market I see 385 again and probably lower this time.

Earnings will not be great according to Zhang and Apple is headed to the dust heap. It was a nice run but it is over.

DECEMBER 30, 2013 5:31 P.M.

Chiam wrote:

If you want to look at midpoints yes but it could be 2.8 to 2.8.

Even 1 million phones a year is a ridiculous number. The network is in many cities already and growing greatly next year. But it will be growing all along the way. I really find this journalism to be lacking and my respect for this column deteriorating.

DECEMBER 30, 2013 5:44 P.M.

taojones wrote:

The Chinese are famous for covering both sides of the argument if you want rules you quote Confucius ,if you want free market universal lay back it takes care of itself you quote Lao Tzu . My Chinese boss explained to me once the secret of understanding the Chinese is they are a practical race. reports that no one will afford the phones and typical pre launch shorting doom merchants will predict the low sales until Jan 19th when the figures come out where we will hear a soft barely audible "never mind" or they will have contradictory articles and point to the right ones . (isn't there a scam where you predict baseball winners by sending out ½ million for one team and 1/2 million for another and then send an offer for a shut e thing betting newsletter (for a fee) to the half you sent the right info to)

DECEMBER 30, 2013 6:01 P.M.

Raj wrote:

Wedge Partners, how many people work there, 15 or so??? The website looks like it was assembled by a middle schooler. How does this wedge shop get any press or taken seriously, common Barrons, really, this must be a new low.

DECEMBER 30, 2013 6:07 P.M.

Raj wrote:

Wedge who? Seriously how many people work there like 15 or something? The web site looks like ti was built by a middle schooler, this must be a new low for Barrons or they joined the Samdung payroll. Who knows. Wow.

DECEMBER 30, 2013 6:39 P.M.

Richard5832 wrote:

This weirdly incoherent story will not die, a good example of a Twitter-amplified $aapl-bashing "patho-meme."

Chitra Nawbatt (@chitranawbatt) of BNN has reported that China Mobile received 1 million pre-orders after 1 day, and over 2 million after several days.

Note also that, even before the Dec 22 announcement of the deal, the company had already accumulated over 80,000 pre-orders for Beijing alone, a city that constitutes less than 1.4% of China's population.

The phone is not going to be sold for almost 3 weeks! This is by far the longest pre-order period for an iPhone. Comparison to he other carriers are inapt; those were for a few days ahead of the sale.

Let's see what the preorders are on January 15.

DECEMBER 30, 2013 7:15 P.M.

Anonymous wrote:

To those complaining about how Apple is trailing Amazon, Google, Priceline. . . I have an easy solution for you: sell AAPL and buy GOOG, AMZN and PCLN.

DECEMBER 30, 2013 7:22 P.M.

Ann wrote:

Who is Zhang? Some paid Chinese piper from Wedge? Who the F is Wedge? The combination of these 2 Clueless parties is Comical. What did he do? Sit in some Chinese Lounge in Bejing and count people walking out of China Mobile with an IPhone and chicken wing? Just another Puke from some low life Hedge fund trying to make a buck. Get a F job

DECEMBER 30, 2013 7:41 P.M.

Bill wrote:

Tim Cook is a Dope. How he got the CEO job nobody knows. This guy is the most incompetent, laughed at, abused, and manipulated CEO in al of tech. He is the joke of Wall Street and Hedge Funds. They lick their chops every week knowing they will get rich again off Tim Cook's Incompetency. Every were they dictate Apple's stock price via weekly options and make millions, while Tim Cook ensures Equality for all. This guy is a complete Bozo. Apple should be near 800 but it sits at a pathetic 550. Now he has the balls to tell Shareholders to vote against Carl Ichan, after Cook has done Squat for 2 years managing money and increasing shareholder value. It's time Shareholders rise and get this Bozo out of the CEO job. What a walking Disaster Tim Cook is. He must have pictures of all the Board members cause this Clown belongs running a Circus not Apple. He is F hated by Wallstreet and all the hedge funds. He is weak and abused. Carl Ichan is right on. Don't let Cook and his country club members tell you otherwise. They have a nice little thing going at Apple padding their accounts with stock options and bonuses, while the Shareholders get Porked! Enough is enough. Send Cook back to Auburn where he can teach Equality Classes and get a Real CEO into Apple and stop this sinking ship. Cook must go!!!!!!!!

Leave Tim Cook alone! He's doing a great job and better than Steve Jobs in many respects. As an AAPL investor can not be more happy with him.

DECEMBER 30, 2013 9:15 P.M.

CP wrote:

Chitra Nawbatt commented on the Business News Network (of Canada) on 12/27 that the iphone preorders on China Mobile was up to 2 million. Furthermore, the video segment suggested that 1 million of the orders happened between 12/25 and 12/27 (indicating a significant acceleration on Christmas day). This contradicts Wedge Partners' numbers.

I'm inclined to agree with Ms. Nawbatt. The Beijing Preorder site has been taken down, but the Suzhou site counter is still functional. Prior to the CM announcement, the counter was reading about 6,000. Now, it's at 23,889 (298.15% increase). Although this is a small sample, I believe the other major cities will have similar (percentage) increase in preorders. I think this makes Ms. Nawbatt's 2 million number more likely.

DECEMBER 30, 2013 9:50 P.M.

Dan wrote:

Chairman of China Mobile said last week, "beginning on Friday, January 17, 2014. iPhone 5s, the most forward-thinking smartphone in the world and iPhone 5c, the most colorful iPhone yet, will be available for pre-registration from China Mobile's official website and customer service hotline "10086" beginning on Wednesday, December 25, 2013." This is PRE-REGISTRATION. Not orders. There are no prices yet. Who is going to order when they don't know the price?

Again Tiernan, This is PRE-registration which is basically leaving your phone number so they can contact you to come buy when available. They are just getting your info so they can follow up.

Again Mr. Ray, there is no way that Zhang would have any clue to this real number and there could not be 1,000,000 orders or 2,000,000 orders as this is pre-registration. From going on CM website and converting it to English using Chrome Browser, I saw what pre-registration was. This is why they started preorders early because it was not preorders but registration.

Again How can someone buy a very expensive item without knowing the subsidies or the price?

DECEMBER 30, 2013 10:35 P.M.

William wrote:

How does it feel Tiernan Ray to have contributed to the drop in AAPL today by publishing an article that makes no sense at all? How can you sleep at night?

DECEMBER 30, 2013 10:53 P.M.

Chiam wrote:

I am writing a letter to Lee Fenwick(CEO Barron's) to inform him that we who pay for this sloppy journalism, would appreciate some honest reporting.

It is a disgrace. Really. Pre-Registration. Now if you called up and found out that you could register to get a phone call, you might say I don't want someone bothering me. I would never leave my number so a sales person can call me. But they tease you that you will get ahead of others. But there will be plenty of phones. Apple saw to that. But they are gearing up now and it will take till the 17th of January to start pulling this off.

There will be million and millions of orders. 40 million people afford the best phone at high prices and only get 2G. When you can afford the best phone and just get 2G, you are going to trade that old one in and buy a new one that can get 4G. Remember you can sell the old one for a good amount of money.

Wow I have never been this upset and anything I have ever read. I really think the readers got the short end of the stick.

Apple should hire the group of Monkeys from the Career Builder.Com commercial to replace their ' Useless, Pathetic, Silent, and Invisible Public Relations and Investor Relations Teams at Apple. The Monkeys would excel at their jobs.

DECEMBER 31, 2013 9:41 A.M.

KC wrote:

iPhone is like Rolex, it is for people who can afford it. There are lots of smartphone in the market

DECEMBER 31, 2013 10:12 A.M.

Joe wrote:

Who the heck is Zhang? Wasn't that a drink they used in the Apollo space mission?

JANUARY 2, 2014 11:13 A.M.

Michael Cunningham wrote:

Jun Zhang

The analyst with a 47% success rate and-1.1% avg return. http://stks.co/i06kT
He also missed the S&P prediction the most last year, missing the rally.

The performance leads me to think that Jun has no idea what he's talking about.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.